Banksters

“The World Has No Money, And The Emperor Has No Clothes”

Most of us are aware of the very old fairly tale by Hans Christian Andersen in which two weavers promise an emperor the finest suit of clothes imaginable, but from a fabric invisible to anyone who is unfit for his position or “just hopelessly stupid”.  Well, in the fairy tale it turns out that nobody wants to admit that they are “unfit” or “stupid”, so when the emperor parades before his subjects in his imaginary new suit of clothes, it takes a child to cry out: “But he isn’t wearing anything at all!”  Well, many of us have been declaring that the world economy “has no clothes” for some time now, but when the anchor of NBC News declares it on national television it gets a bit more attention.  During his recent appearance on The Late Show with David Letterman, NBC’s Brian Williams was asked about the world financial situation.  His answer included this shocking statement: “The world has no money, and the Emperor has no clothes.”

During the interview, it was readily apparent that Williams was honestly shaken up by what had happened last Thursday in the stock market.  But who can blame him?  After all, most of us who watch the markets were totally stunned when the stock market dropped almost 1000 points exactly in less than an hour.

Normally a network news anchor is much more guarded and is much more careful about what is revealed to the public.  But on Letterman’s show, Williams gave us a glimpse of what he really thinks about the world economic situation….

“If I wasn’t a tad too close to this, I’d probably not leave the house.  But that’s how bad it is.”

A video clip that includes these jaw dropping comments by Williams is posted below….

So why did the U.S. stock market plunge so rapidly last Thursday?

Well, many have blamed the episode on a “bad trade” or a “computer glitch”.  Others claim that the Greek debt crisis caused a brief panic.  There are yet others who see something more insidious going on – such as Goldman Sachs seeking to remove their name from the financial headlines, or the Federal Reserve sending a message that S. 604 (the bill to audit the Federal Reserve) should not be passed.

The truth is that we will probably never know what actually caused the market to fall through the floor that afternoon.

But it did pave the way for more bailouts.

Over the weekend, European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases designed to stop the sovereign debt crisis that threatened to shatter confidence in the euro.

The Federal Reserve got into the act as well.  Over the weekend the Fed promised to flood the international financial system with U.S. dollars.  This was seen in the markets as a sign of “resolve” meant to keep doubt about the European economy from turning into a global crisis of confidence.

So on Monday, investors responded to these bailouts with exuberance.  The Dow Jones industrial average gained 405 points that day, which was the average’s biggest one day point gain since March 23rd, 2009.

But are more bailouts, more debt and a flood of paper money really something to celebrate?

No.

The truth is that debt and paper money that continually declines in value are some of the chief causes of the financial mess that the world is now in.

In fact, Congressman Ron Paul is warning that the European bailout that was just announced will just lead to even larger financial problems in the future….

And Ron Paul is right – all of these bailouts and all of this debt will eventually cause all of the major paper currencies (including the U.S. dollar) to collapse.

The funny thing about these bailouts is that they never seem to help the average people on the street.  Just take a look at the U.S. economy.  We are told that Wall Street has recovered and that things are getting back to normal, and yet more Americans than ever find themselves dependent on the U.S. government for their survival.

The U.S. Department of Agriculture recently announced that 39.68 million people, or 1 out of every 8 Americans, were enrolled in the food stamp program during February, an increase of 260,000 from the previous month.

Nearly 40 million Americans on food stamps?

How in the world did that happen?

Once upon a time, the old timers would tell us that one day things would get so bad that we would all have to stand in bread lines.

Well, today food stamps are the new bread lines.

If you have to rely on the government for the very bread that you eat, what kind of a position does that put you in?

The truth is that the once great American middle class is allowing the system to slowly keep grinding them into oblivion.

Like never before in our lifetimes, wealth is being concentrated in the hands of the “lucky one percent”, while the rest of us are rapidly being marginalized.

Do you ever stop to wonder why it seems like almost everyone is either broke or up to their eyeballs in debt?

That even goes for the major governments of the world.  The U.S. government (the “wealthiest” nation on the globe) has piled up the biggest mountain of debt in world history.

You see, Brian Williams was actually chillingly accurate when he declared that “the world has no money”.

So if the world doesn’t have any money, then who does have it?

The international bankers.

But, shhhhh, don’t tell anybody.

Just keep quietly clapping as the emperor walks down the street with no clothes on.

8 Theories For Why The Stock Market Plunged Almost 1000 Points In A Matter Of Minutes On May 6th

In one of the most dizzying half-hours in stock market history, the Dow plunged nearly 1,000 points on Thursday, May 6th before bouncing back to close down 347.80 points.  This represented the biggest intraday decline since 1987.  But what made this crash so absolutely shocking is that it happened in the course of less than an hour.  Between 2 p.m. and 3 p.m. the Dow lost over 700 points before dramatically bouncing back about 600 points.  Two of the 30 stocks in the Dow, Procter & Gamble and 3M, plunged more than 30% in just 15 minutes.  Accenture went from trading at around 40 dollars a share all the way down to one cent before bouncing back.  Traders and investors were left completely stunned and wondering what in the world had just happened.

So what did happen?

The following are some of the most common theories being put forward to explain what happened….

#1) A Bad Trade

It has been widely suggested that a “fat finger trade” was responsible for triggering the panic.  According to CNBC, “sources” have told that network that a trader (possibly at Citigroup) entered a “b” for billion instead of an “m” for million in a trade involving Procter & Gamble.

However, Citigroup has already announced that it has found “no evidence” that it was involved in any erroneous trades.  In fact, a statement was released in which Citigroup spokesman Stephen Cohen said this….

“At this point, we have no evidence that Citi was involved in any erroneous transaction.”

#2) A Computer Glitch

New York Stock Exchange spokesman Rich Adamonis says that “there were a number of erroneous trades” on May 6th, and that these could have been caused by computer error.

And the truth is that trading in the financial markets is more automated and more reliant on computers than it ever has been before.  Trading literally moves at lightning speed now, and a number of analysts are warning that the pace of the market is so fast at this point that it is really easy for things to spin out of control very quickly.

But if this was really primarily caused by a “computer glitch”, how are investors supposed to have any confidence at all in the market?  After all, if a computer error can wipe out half your account in less than an hour, why invest at all?

#3) Cascading Stop Losses

Once the market hits certain technical levels, it is going to automatically start triggering stop loss orders.  Once those stop loss orders are triggered, it will push the market down further thus triggering more stop loss orders.

While there have been some protections implemented to guard against this kind of thing, the reality is that it does still happen.

#4) Hackers

Hackers have become more sophisticated and more cunning than ever before.  In fact, the bigger a target is, the more enjoyment most hackers get out of taking them down.  Is it a possible that someone could have hacked in to the New York Stock Exchange?

#5) Cyberterrorism

Rogue nations and terrorist organizations have been developing their “cyber warfare” capabilities for some time now.  We have been repeatedly warned that someday we will see an “Internet 9/11”.  Could this stock market plunge be a preview of that?

#6) Fear Of The European Debt Crisis Spreading

There are mounting concerns in the financial markets about Greece’s financial condition and that the European debt crisis could spread around the globe.

In fact, the Dow has lost 631 points, or more than 5%, in just the last three days amidst worries about the situation in Greece.  This represents the biggest three day drop since March 2009.

#7) Stop Hunting

Anyone who has spent much time in the Forex market knows what this is all about.  The truth is that some of the big financial sharks in the marketplace seem to really enjoy blowing out stop losses.

So could have this have been a situation where a stop loss hunting expedition spun wildly out of control?

#8) A Real Panic

There is also the possibility that this was a real financial panic.  There are huge concerns about what is going on in Europe and the currency markets are fluctuating wildly.  The Dow was already down several hundred points even before the massive plunge took place.  The reality is that there is a lot of fear in the financial markets right now.

But if it was a real panic, then why did the Dow bounce back so quickly?  Well, it is the job of the “plunge protection team” to keep the stock market from declining too rapidly.  So did the “plunge protection team” swing into action today?  Well, the truth is that we will probably never know because the general public is not supposed to know when they intervene.

In any event, the next couple of days should hopefully make all of this a lot clearer.  The trading during the afternoon of May 6th at the big firms will be gone over with a fine-toothed comb, and the exchanges will be closely analyzing their systems for any glitches.

It has already been announced that some of the most erroneous trades will be cancelled.  The Nasdaq and NYSE’s ARCA trading unit have both said that they will cancel trades executed between 2:40 p.m. and 3 p.m. on May 6th where a stock price rose or fell more than 60 percent from the last trade in that security at 2:40 p.m.

But this episode shows just how vulnerable our financial markets really are.  After witnessing what we saw today, it is going to be really hard to have confidence in the system.

In fact, even if this was just one “bad trade” or a “simple computer glitch”, the reality is that this episode is going to inject even more fear into a marketplace that is already filled with tension.

When fear grips a market things can go south very, very quickly.  The truth is that markets tend to fall more quickly than they rise, and if a wave of panic starts sweeping over the financial markets we could see things get quite messy in the coming days.

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How Is The U.S. Economy Supposed To Succeed When Our Politicians And The Big Banks Are Making Billions Of Dollars Betting Against It?

Most people around the globe think of America as a great “capitalist” economic machine, but the truth is that the U.S. financial system is essentially one massive betting parlor at this point.  In fact, there has been a whole lot of easy money made in this betting parlor over the past several years by our politicians and by the big financial players down on Wall Street.  So how did they make all of this money?  They did it by betting against America.  By betting that the U.S. economy would do badly, a lot of very powerful people have gotten insanely wealthy.  Literally billions of dollars have been made over the past five years simply by betting that the U.S. housing market would go into the toilet.  But is all of this “short selling” and are all of these “side bets” actually good for the American economy?  How is the U.S. economy supposed to succeed when the big banks and so many of our politicians are actively making bets against it?

Just take a moment and check out some of the folks that have been betting against America….

*A Wall Street Journal analysis of congressional disclosures shows that 13 members of the U.S. Congress or their wives were engaged in substantial short selling during the financial crisis of 2008.

*An individual by the name of Jeff Greene made hundreds of millions of dollars during the real estate collapse by making huge bets against the residential housing market.  Now he wants to use some of that money to run for the U.S. Senate in Florida.

*Goldman Sachs openly and brazenly bet against its own clients as the housing market began to implode back in 2007 and 2008, and they made a TON of money by doing so.

*John Paulson (with the assistance of Goldman Sachs) has quickly become one of the richest men in the United States by betting against America.  Shorting the subprime mortgage market enabled his firm, Paulson & Co., to make 15 billion dollars in 2007.  John Paulson alone made approximately 4 billion dollars that year.

*Legendary investor Warren Buffett said on Saturday that he’s bearish about the ability of all currencies to hold their value over time because of massive deficits being run up by governments in the wake of the global financial crisis.

*The Federal Reserve holds credit-default swaps on the debt of Florida schools, and on debt owed by the states of Nevada and California.  So the Federal Reserve would profit if one of those states defaulted on its debt.

*JPMorgan Chase, Bank of America, and Citigroup are offering “municipal credit default swaps” that enable investors to make big money if U.S. states and cities end up defaulting on their debts.

It is one thing to make a legitimate profit on an investment.  It is another thing entirely for the biggest financial institutions in the United States and our politicians to be making massive amounts of money off of the economic collapse of America.

You see, those making huge bets against the U.S. economy also have an incentive to do what they can to make those bets profitable.  So for those who have the power to do so, does there come a point where they give the U.S. economy a little “push” in the wrong direction so that their bets will pay off?

The reality is that we have created a financial environment where fear rules.  For example, very few people want to back U.S. home loans anymore.  So now the U.S. government has to do it.  According to Inside Mortgage Finance, U.S. government-related entities backed 96.5% of all U.S. home loans during the first quarter of 2010.  This was up from 90% in 2009.

We should really rethink a financial system where a few people make a ton of money off of the fact that everyone else is doing badly.  Sure a few people are laughing all the way to the bank, but America as a whole is hurting.

Just consider the following charts.  U.S. national income has never experienced such a radically negative change in modern times….

All of these economic problems have caused the revenue of the U.S. government to dramatically decline at the same time expenditures are rocketing into the stratosphere….

As the U.S. economy continues to tank, the U.S. national debt is going to keep spinning wildly out of control.  Back in 1980, the U.S. national debt was approximately 1 trillion dollars.  Today it is accelerating rapidly as it pushes past 12 trillion dollars and towards 13 trillion dollars….

The truth is that the massive deficits being run up not only by the U.S. government, but by governments all over the world, are something that is clearly not sustainable.  In fact, Warren Buffett recently made an interesting remark about how painful it is going to be when the debt party ends….

“How the world weans itself off huge deficit financing is going to be difficult to watch.”

In fact, there are some nations that are in bigger trouble with debt than even the United States is.  Japan’s gross public debt has reached 201% of GDP, and the only way that the government of Japan can avoid bankruptcy at this point is by borrowing ever-increasing amounts of money.

But the truth is that this game cannot be played forever.

There has never been a time when so many nations around the world have piled up so much debt so quickly.

When the sovereign debt bubble pops, things are going to get really messy and the dominoes will start falling really quickly.

But when that happens one thing is for certain – there will be a lot of people ready to make a lot of money by betting on the financial failures of others.

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Created Out Of Thin Air – That Is Where The Federal Reserve Got The 1.3 Trillion Dollars That It Bought All Of Those Mortgage Backed Securities With

When the mainstream media told the American people that the Federal Reserve was going to “help” the housing industry by buying up hundreds of billions of dollars worth of toxic mortgage backed securities, very few people probably even stopped to wonder where all of that money was going to come from.  Well, the truth is that it did not come from anywhere.  It was made up out of thin air.  In fact, a total of 1.3 trillion dollars was just “printed into existence” so that the Fed could soak up these problematic securities (and help their buddies down on Wall Street in the process who were desperate to dump them).  During a recent Joint Economic Committee hearing on Capital Hill, U.S. Representative Ron Paul directly confronted Federal Reserve Chairman Ben Bernanke about this 1.3 trillion dollars.  As Ron Paul described how this 1.3 trillion was just created out of thin air, all Bernanke could do was nod his head.  Why?  Because it was the truth.

Of course we all know that the Federal Reserve creates money out of thin air all the time, so that is not new, but what is new is the recklessness and openness with which they are going about doing it.

Need to help your buddies down on Wall Street by buying up a tsunami of bad mortgage securities?

Just zap another trillion dollars into existence!

Need to bail out the mortgage giants Fannie Mae and Freddie Mac?

Just get the magic money printing machine ready!

Wouldn’t it be nice if the rest of us could create money out of thin air?  It would make life so much easier.

A video clip of the exchange between Ron Paul and Bernanke at this hearing is posted below.

The key moment comes when Ron Paul makes this statement….

“Well, where did you get the money? You created this money. So you did monetize debt, and that went into the banking system.”

As you watch this video, you will notice that at that moment Bernanke nods his head up and down repeatedly….

So who does all of this money printing benefit?

Well, it benefits the Federal Reserve and the big financial institutions on Wall Street that have financial ties to the Federal Reserve.

It certainly does not benefit the rest of us.

No, in fact Bernanke says that the rest of us need to get ready to pay higher taxes and have a lower standard of living in order to pay for the big financial mess that our politicians and the Fed have gotten us into.

So while there are lots of smiles going around in Washington D.C. and on Wall Street these days, the same cannot be said for the rest of the good ole U.S.A. as the following video illustrates….

The reality is that the United States is a nation that does not even have control over its own currency.  If the United States government wants more money, it has to go ask the Federal Reserve to create it.  Unfortunately, the Federal Reserve does not also create the interest that will ultimately be paid on that new money that is being created.  So where will the money come from to pay the interest?  Well, by creating even more money (debt) in the future.  It sounds like insanity, but that is the U.S. financial system.  It is a perpetual debt machine that was created to have an ever expanding national debt that is mathematically impossible to pay off.

Just because the folks down on Wall Street do not dress up in gang colors or try to sell drugs to our children does not mean that they are not corrupt or that they are not criminals.  In fact, the truth is that the corruption in our financial system is hitting unprecedented levels.

But most Americans have no idea what in the world is going on in the financial system.  All most of them know is that things are getting bad and they want somebody to “fix” the problems.

Unfortunately, the folks that the American people are expecting to “fix” things are the very same ones who got us into this mess in the first place.

“Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States.”
-Senator Barry Goldwater

“A great industrial nation is controlled by it’s system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world–no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men.”
-President Woodrow Wilson

“The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson.”
-Franklin Delano Roosevelt

“The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarchy, more insolent than autocracy, and more selfish than bureaucracy. It denounces as public enemies all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe.”
-Abraham Lincoln

“Give me control of a nation’s money and I care not who makes it’s laws”
-Mayer Amschel Bauer Rothschild

Revealed!

Why You Should Be VERY CONCERNED About The Financial Crisis In Greece

Up to this point, it seems as though most Americans have not really been too concerned about the financial meltdown that is taking place in Greece.  But they should be.  The truth is that the debt crisis we see playing out in Greece may soon repeat itself in some of the largest nations in the world such as Japan, the U.K. and even the United States.  Once upon a time, this kind of thing only happened in third world nations, but now virtually every nation on earth has a debt problem.  As the saying goes, the borrower is the servant of the lender, and so when a country like Greece gets in way, way too deep financially, it ends up having to give up a portion of its sovereignty to those controlling the purse strings.  In the case of Greece, those controlling the purse strings are the IMF and the EU.  But it just isn’t Greece that is in trouble.  Dozens of nations are in serious financial trouble and are at the mercy of those who can bail them out.  The truth is that global financial institutions like the IMF, the World Bank, the European Central Bank and the Federal Reserve are increasingly gaining power all over the globe as governments around the world continue to accumulate frightening amounts of debt.

This has been quite a week for Greece and for the other nations in Europe teetering on the edge of financial disaster.  Standard & Poor’s reduced Greek debt to “junk” status, and Spain and Portugal’s debts were also downgraded substantially.  These unprecedented steps by Standard & Poor’s have many concerned that this financial “contagion” could start spreading across all of Europe.

We’ll take a look at the “austerity measures” being forced on Greece in a moment, but first it is important to note that financial panic is already spreading to other nations in the region.

In Portugal, the government has announced that additional “austerity measures”, beyond those in the current three year plan, are expected to be implemented.  Perhaps they wouldn’t need to take such drastic steps if they hadn’t spent all of those millions constructing those shiny new soccer stadiums a few years ago.  But in any event, many analysts are now forecasting that Portugal will be the next domino to fall.

Officials in Spain are expected to announce this week that unemployment has hit 20%.  But of course any nation that implements a hardcore “cap and trade” law like the one in Spain should expect unemployment to soar into the stratosphere.  So they are just reaping what they have sown, but the fallout could end up being very painful.  Spain’s economy is approximately five times larger than Greece’s so if Spain ends up defaulting it will create a financial nightmare for all of Europe.

There are now rumors that even Italy and Ireland are in a massive amount of trouble financially.

So will the EU and the IMF end up having to bail all of them out?

Well, for now Greece is first in line.

European officials said on Friday that the Greek government, facing a rapidly deteriorating financial situation, is close to completing negotiations for assistance from the International Monetary Fund.

So Greece is going to get the money that it needs – but it comes with strings.

Greece must surrender some of its fiscal sovereignty and adopt a three year program of severe spending cuts and higher taxes.

In fact, one major Greek newspaper says that wage and job cuts for public workers will also be ordered alongside the spending cuts and tax increases to get through what they are calling “three hard years”.

You see, the truth is that Greece is a highly socialized nation.  In a population of just over 11 million people, Greece employs more than a million in the public sector.

Just think about that for a moment.

That is huge.

They get paid extremely well, and Greek civil servants also enjoy very generous pension benefits and early retirement.

Needless to say a lot of these Greek civil servants are not happy at all about the changes the IMF is forcing upon them, and they have called a general strike for May 5th.

For his part, the Greek Prime Minister, George Papandreou, is trying to convince the Greek people that these new spending cuts and tax increases are necessary to keep his nation afloat.  According to The Associated Press, Mr. Papandreou recently told the Greek Parliament the following….

“The measures we must take, which are economic measures, are necessary for the protection of our country — for our survival, for our future, so we can stand firmly on our feet.”

There are even fears that this sovereign debt crisis could spell the end for the Euro.  Back on Wednesday, the leaders of the 16 countries currently using the Euro called an emergency meeting to attempt to avert a Euro meltdown triggered by Greece’s financial collapse.

Of course the Euro is not actually going to collapse, but the fact that they all felt the need to get together and talk about this situation is quite telling.

In fact, the language used by some of the top financial authorities in the world when speaking about the Greek debt crisis is quite alarming….

Angel Gurría, head of the Organization for Economic Cooperation and Development:

“This is like Ebola. It’s threatening the stability of the financial system.”

Colin Ellis, economist at Daiwa Capital Markets:

“The time for horse-trading, prevarication and posturing is over. Arguably, the very future of the euro area is now teetering on a knife edge.”

Dominique Strauss-Kahn, head of the International Monetary Fund:

“If we don’t fix it in Greece, it may have a lot of consequences on the EU.”

But for the people of Greece, getting help with their debt means giving up their ability to determine their own affairs.  They have gotten into so much debt that now they are forced to do whatever the IMF and the EU tell them to do.  Of course there are many in Greece who are extremely upset by this as evidenced by the recent riots there….

But this is what happens when a nation allows itself to get into way too much debt.  In fact, this has been done by design in third world nations for decades.  In his extraordinary book, Confessions of an Economic Hitman, John Perkins explained how it was his job to go around the world and get third world governments to accept multibillion-dollar loans that he knew they would never be able to repay.  Of course when the time came and they could not repay the loans, the big global institutions would go in and confiscate natural resources and impose “conditions” and implement “austerity measures” similar to the ones they are currently imposing on Greece.

The alarming thing today is that it just isn’t third world nations where this game is being played anymore.  Now that they have perfected the blueprint, they are trying it out on nations like Greece.

The reality is that this is all part of the push towards globalization.  In fact, Jean-Claude Trichet, the president of the European Central Bank, emphasized the need for global coordination in financial matters during his April 26th address at the Council on Foreign Relations.

“Global coordination” sounds nice, but just like “global governance” and “global cooperation”, it is just another way of saying that we need to transfer more power and more authority to globalist institutions.

You see, whatever problem that pops up (in this instance it is the Greek debt crisis), the solution always seems to be to transfer more power to global institutions.

In fact, as a “solution” to the global financial crisis, the IMF is proposing two new taxes on financial institutions worldwide: a “financial stability contribution” which levies a small charge on financial institution balance sheets, and a “financial activities tax”, which would tax “excess profits” and bonuses.

As the nations of the world continue to get deeper in debt, and as more power and more money is transferred to unelected global institutions, the people of the world may find their lives increasingly being run by heartless bureaucrats on the other side of the globe.

For anyone who loves freedom, that is a very sobering thought.

The Economic Recovery Is Moving Along Quite Well – For The Boys Down On Wall Street

If you are part of the Wall Street establishment, the economic recovery is moving along quite well.  Many of the biggest firms on Wall Street just handed out record-setting bonuses, the Stock Market has been moving up steadily and the DOW is back up to around 11,000.  Profits at the top banks have been quite impressive lately.  Bank of America, JPMorgan Chase, Citigroup and Wells Fargo combined for first quarter profits of $13.4 billion – the most in almost three years.  Yes, life is quite good down on Wall Street these days.  People are still buying fast cars, big yachts and homes in the Hamptons.  It is almost as if “the greatest financial crisis since the Great Depression” didn’t even happen.  Things are quickly getting back to “normal” for the banking elite and to many it seems like there are a lot more smiles down on Wall Street than there have been in a long, long time.

Bank of America’s chief executive officer, Brian T. Moynihan, is being quoted by Reuters as saying that “the worst of the credit cycle is clearly behind us” and that the economic growth we are experiencing is “real”.

JPMorgan CEO Jamie Dimon is quoted as saying that the U.S. economy may be poised for “a strong recovery”.

And why wouldn’t they say these things?  Profits are up.  Their stock portfolios are up.  They are getting record bonuses.  They know that if anything does go wrong again that their friends in Washington D.C. will bail them out because they are “too big to fail”.

But for tens of millions of other Americans, the economy seems like it is getting worse than ever.  It is hard to explain the gut-wrenching agony that many highly-educated and highly-qualified American workers are going through as they send out hundreds of resumes only to get no response.  Or the absolute frustration of only being able to get a very low paying retail job and realizing that it will not even be able to pay the mortgage – much less support an entire family.  Or the soul-crushing despair of working two or three jobs and still not being able to pay the bills at the end of the month.

But these are the daily realities that millions of Americans must face now.  The truth is that there are not nearly enough jobs for everyone.  The number of unemployed Americans per job opening hit 5.5 in February.  It is like we are all caught in some bizarre game of musical chairs, and the losers end up destitute and out in the street.

Even many of those who can get jobs find themselves in bad situations.  Gallup’s underemployment measure hit 20.0% on March 15th.  That was up from 19.7% two weeks earlier and 19.5% at the start of the year.  A lot of very educated, very qualified people find themselves slaving away at jobs that high school students are qualified for.

But the ones being hurt the worst by this unemployment epidemic are the poor.  Check out the following chart.  At the end of 2009, the unemployment rate for those at the top end of the income scale in the United States was about 3%.  For those at the bottom of the income scale, the unemployment rate was about 30%….

It isn’t the boys down on Wall Street that are losing their homes and their jobs.

No, they are “too big to fail”.

It is millions of ordinary Americans that are losing their homes and their jobs.

And things keep getting worse.

According to RealtyTrac, foreclosure filings were reported on 367,056 properties in the month of March.  This was an increase of almost 19 percent from February, and it was the highest monthly total since RealtyTrac began issuing its report in January 2005.

Not only that, but RealtyTrac projects that there will be a total of 4.5 million home foreclosures by the end 2010.  If you figure that there are approximately 4 people per household, that is another 18 million people that will be facing the pain of a foreclosure filing.

For many Americans, losing their home to foreclosure is just too much.  For example, one man in Ohio actually decided to bulldoze his own home rather than let the bank take it in foreclosure proceedings.

Because of the extreme economic conditions, millions of Americans are in severe pain and are becoming increasingly desperate.  In some of the most depressed areas, crime is absolutely spiralling out of control.  So far this year in Detroit, car thefts are up 83%, robberies are up 50%, burglaries are up 20% and property destruction is up 42%.

Adding to all of this economic despair is the fact that food and gas prices are starting to shoot up.

In some areas of the United States, people are already paying as much as $3.50 for a gallon of gasoline, and many experts are now predicting that gasoline could hit $4.00 a gallon by the end of 2010.

Not only that, but wholesale food prices rose 2.4% in March, matching the biggest gain in 26 years.

So while the economic recovery is buzzing along quite well down on Wall Street, the reality is that for millions of other Americans things are really hard.  In fact, not even the smaller banks are experiencing much of a recovery.  The FDIC’s list of problem banks just hit a 17-year high.

No, the main beneficiaries of this “economic recovery” are the boys over on Wall Street.  They should enjoy it while it lasts, because even harder economic times are on the way, and the reality is that none of us will be able to completely escape the economic pain that is coming.

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Megabanks: The Banking Oligarchy That Controls Assets Equivalent To 60 Percent Of America’s GNP

Today financial power is being concentrated in the hands of fewer and fewer individuals.  In fact, the six biggest banks in the United States now possess assets equivalent to 60 percent of America’s gross national product.  Back in the 1990s that figure was less than 20 percent.  These six banks – Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo – literally dictate what goes on in the U.S. banking industry.  These entities are the poster children for “too big to fail”, and they donate massive amounts of cash to the campaigns of both Republicans and Democrats to ensure that they will continue to receive favorable treatment.  The vast majority of Americans have had a banking account, a credit card and/or a mortgage with one of these institutions at some point.  If they acted in concert, these six banks could literally bring down the U.S. economy overnight if they wanted to.  Together with the Federal Reserve, these six banks represent the real financial power in America.  They are the 800 pound gorilla in the room that influences nearly every major financial deal that gets done and virtually every major political decision that gets made.  As the last couple of years have demonstrated, top politicians from both parties (John McCain and Barack Obama for example) will instantly jump into action and start advocating that the U.S. government spend billions upon billions of dollars when the interests of these behemoths are threatened.  The frightening thing is that the power of these megabanks is growing at a frightening pace.  As dozens upon dozens of smaller U.S. banks are “allowed to fail”, they either go out of existence or the Feds actually encourage these smaller banks to sell themselves to one of the big sharks.  In either event, the banking power in the United States becomes further consolidated in the hands of the megabanks.

Bill Moyers recently interviewed Simon Johnson and James Kwak, the authors of a new book entitled 13 Bankers: The Wall St. Takeover and the Next Financial Meltdown.  During that interview Kwak described to Moyers just how explosive the growth of the power of these megabanks has been….

Bill Moyers: And you write that they control 60 percent of our gross national product?

James Kwak: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.

Does it alarm you that the banking elite have accumulated such a large amount of financial power?

It should.  These institutions have the power to wreck entire economies.  Just consider what happened in Greece lately.  Now, it is being alleged that the megabanks are ripping off American cities with the same kinds of predatory deals that brought down the financial system in Greece. 

And that is what these megabanks are.

They are predators.

In fact, a very revealing article in Rolling Stone described Goldman Sachs this way….

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Unfortunately, they may have actually been understating things a bit.

These megabanks have rigged the game so that the wealth of the nation is slowly transferred from us to themselves and to the international financial interests that control them.

They can make money if the markets are going up, and they can make money if the markets are going down.

For example, in a newly released email from the height of the housing crash, the CEO of Goldman Sachs bragged that his firm “made more than we lost” by betting against the housing market.

Thankfully the SEC is starting to look into the fraud that Goldman Sachs committed during this time period, but the truth is that Goldman is not likely to receive any more than a slap on the wrist for what it has done.

They are way too big, way too powerful and have too many friends in high places for them to get into any real trouble.

For example, it has come out that Barack Obama does not intend to return any of the campaign contributions that he received from Goldman Sachs.  And surely they will be glad to continue to pour big money into his political coffers.

So where does that leave the rest of us?

Well, the rest of us can expect higher taxes and a lower standard of living according to the IMF.  The IMF (which has deep connections to these megabanks) says that the party is “over” for nations that have been enjoying the good life.  In a recent article, the Washington Post summarized the message that the IMF is trying to communicate through their recent policy papers….

To keep the global economy on track, people in the United States and the rest of the developed world need to work longer before retiring, pay higher taxes and expect less from government. And the cheap imports lining the shelves of mega-chains such as Wal-Mart and Target? They need to be more expensive.

So are you ready to work longer, pay higher taxes, expect less from government and have a lower standard of living?

That is what the IMF says we are all going to be facing in the years ahead.

We are all going to financially suffer as the megabanks continue to thrive and consolidate power.

Isn’t that wonderful?

You say you don’t like that so much?

Well, good luck taking on the 800 pound gorilla.

Wow! The SEC Formally Charges Goldman Sachs With Fraud

Wow!  Just when you think the U.S. government is entirely incompetent and toothless when it comes to controlling the corruption on Wall Street something like this happens.  For those who have not heard yet, on Friday the Securities and Exchange Commission filed a civil suit accusing Goldman Sachs of securities fraud.  We’ll get into the details below, but first it is important to note how stunning all of this is.  Goldman Sachs has had an extremely chummy relationship with the U.S. government over the past couple of decades.  A whole host of former Goldman Sachs executives have been appointed to key government positions by both Republicans and Democrats in recent years.  In addition, Goldman Sachs was Barack Obama’s number one campaign donor, and its employees gave $981,000 to his campaign.  But in spite of all that, the SEC has decided to go after Goldman Sachs.

Someone out there has a lot of guts.  Although to be honest it is far too soon to pass final judgment on this while thing.  Let’s see how it plays out.  It could end up being a “white wash” after all.  But at least this is a hopeful sign that justice will be done.

You can see a copy of the official charges filed by the SEC right here.

These charges are a huge blow to the reputation of what is widely regarded as the most powerful firm on Wall Street.  Goldman Sachs earned a record $4.79 billion last quarter, and for years it has seemed as if they could do no wrong.

But all of that has suddenly changed.

After the announcement of these charges by the SEC, Goldman’s shares fell more than 13 percent.

The heart of the charges involves the failure by Goldman Sachs to disclose conflicts in the 2007 sale of a collateralized debt obligation.  According to the SEC, investors in the collateralized debt obligation ended up losing approximately 1 billion dollars.

So what did Goldman Sachs do that was so wrong?

Well, it turns out that Goldman Sachs allowed hedge fund Paulson & Co. (run by John Paulson – not related to Henry Paulson) to help select the securities that were to be included in the CDO.

The SEC says Paulson & Co. paid Goldman around 15 million dollars in 2007 to put together a collateralized debt obligation that included mortgage-related securities that Paulson & Co. believed were very likely to decline in value.  Then Paulson & Co. placed huge bets against the CDO.

When Goldman Sachs presented the collateralized debt obligation to potential investors, they did not tell them that Paulson & Co. was shorting the CDO.

In essence, what happened is that Paulson & Co. helped select mortgage-related securities for the CDO that they thought would definitely fail and then they bet big money that they would fail.  Then Goldman went out and marketed the CDO as a worthy investment to investors and did not tell them that Paulson & Co. were betting big money that the CDO would fail.

When the value of the CDO plunged dramatically just a few months after it was issued, Paulson & Co. walked off with about a billion dollars.

According to the SEC, within 6 months of the issuance of the CDO, 83% of the residential mortgage-backed securities in the portfolio had been downgraded.

Within nine months of the issuance of the CDO, 99% of the residential mortgage-backed securities in the portfolio had been downgraded.

Two major European banks were left holding the bag. ABN Amro, a major Dutch bank, and IKB, a German commercial bank, combined to lose nearly a billion dollars.

The SEC says that it is trying to recoup profits reaped on the deal.

Also being charged by the SEC is a 31 year old Goldman Sachs vice president, Fabrice Tourre.  The SEC alleges that he was principally responsible for putting together the deal and marketing the securities.

You see, this is what happens when you let a young kid play around with hundreds of millions of dollars.

In an almost unbelievable email to a friend, Tourre described himself as “the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”

That is the level of maturity that we can apparently expect from Wall Street executives these days.

No wonder our financial system is falling apart.

In a statement, Goldman Sachs responded to the SEC charges by saying the following: “the SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation.”

But of course Goldman Sachs never admits that they are wrong.

“Our short positions were not a ‘bet against our clients,”‘ Goldman Sachs said in a recent letter to shareholders that discussed Goldman’s behavior during the recent housing crash. “Rather, they served to offset our long positions. Our goal was, and is, to be in a position to make markets for our clients while managing our risk within prescribed limits.”

But other financial analysts are applauding this action by the SEC….

In a note to his clients on Friday, Chris Whalen, a bank analyst at Institutional Risk Analytics noted the following….

“This litigation exposes the cynical, savage culture of Wall Street that allows a dealer to commit fraud on one customer to benefit another.”

A brief video news report about these charges against Goldman Sachs is posted below….

So will there be additional charges against Goldman Sachs?

Let’s hope so.

The truth is that the misbehavior documented above is just the tip of the iceberg.

Goldman Sachs helped create the housing collapse by selling mortgage-related securities that were absolute garbage to trusting clients at vastly overinflated prices.  Then Goldman Sachs placed huge bets against those same mortgage-related securities and also placed huge bets against the U.S. housing market.  When the U.S. economy collapsed in 2008 and 2009 they ended up making huge profits.

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,”Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, told The New York Times. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

Even with today’s action by the SEC, it still seems extremely unlikely that Goldman Sachs will ever be held fully accountable for all that they have done.  They are just too big and too powerful and they have too many big and powerful friends.

But at least today is a beginning.

For years Goldman has been considered almost untouchable.  They have been considered an almost “all-powerful” financial monster that pretty much does whatever it wants.

An article in Rolling Stone described it this way….

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

But perhaps today will start to change that.

Let’s hope so.

For much more on Goldman Sachs and all of the mischief that they have been involved in, please read our recent article entitled “How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps”.

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